Indices
Indices (or index, singular) are effectively notional markets that either aggregate the performance of other markets, or try to factor in other data into a numerical way. They are also another basis for trading CFDs. For example, some brokers allow traders to buy CFDs at UK interest rates which are indexed to allow month on month and year on year comparisons. Or, a trader might invest in the S&P 500 – an index comprised of the aggregate of 500 large US companies.
What Is It For?
Imagine you, as a trader, see a great opportunity in the UK economy. A combination of factors has come together to suggest that the UK as a whole will perform well and the likelihood of a surge in the markets is significant. How best do you capitalize on this opportunity? Indices provide a way for a trader in this type of scenario to invest more flexibly on markets that wouldn't otherwise be open to him, for example using the FTSE100 as the basis for speculating as opposed to individual shares. Indices allow traders a heightened degree of flexibility as compared to trading in markets alone and in the process enable traders to take advantage of a broader range of CFDs.
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